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Kenya is now the cheapest country to purchase diesel in Eastern Africa

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Kenya is now the cheapest country to purchase diesel in Eastern Africa

Culled from Businessdailyafrica

By John Mutua

 

SUMMARY

  • A litre of the commodity costs Sh112.63 on average in Kenya, compared to Sh118.44, Sh139.08 and Sh149.91 in three of the six East African Community countries, Tanzania, Uganda and Burundi, respectively.
  • This bucks a trend where Kenya has had the costliest super petrol and diesel in the region mainly due to relatively high taxes and levies.
  • The shift in the market structure is linked to the introduction of monthly subsidies in Kenya, which cut the current diesel prices by Sh23.29 a litre.

Diesel prices in Kenya are the lowest in eastern Africa in the wake of the monthly subsidy, reversing the market structure that made the country’s fuel the most costly in the region.

A litre of the commodity costs Sh112.63 on average in Kenya, compared to Sh118.44, Sh139.08 and Sh149.91 in three of the six East African Community countries, Tanzania, Uganda and Burundi, respectively.

This bucks a trend where Kenya has had the costliest super petrol and diesel in the region mainly due to relatively high taxes and levies, which encourage local motorists in border towns to fuel in the neighbouring countries.

The shift in the market structure is linked to the introduction of monthly subsidies in Kenya, which cut the current diesel prices by Sh23.29 a litre.

“The big difference is mainly attributed to the subsidy that the government has been using,” said an official at the Energy and Petroleum Regulatory Authority (Epra).

Kenya introduced the subsidy on April 14 last year as part of efforts to defuse simmering public anger over the high cost of basic items.

The subsidy has kept pump prices unchanged for the fourth month in a row despite a jump in the cost of shipping the refined fuel.

It is supported by billions of shillings raised from fuel consumers through the petroleum development levy, which was increased to Sh5.40 a litre in July 2020 from Sh0.40, a 1,250 percent rise.

The fund cushions consumers from volatility in fuel prices but has also seen motorists lose out when paying the Sh5.40 for a litre at the pump.

Tanzania is the only country in the region with cheaper super petrol than Kenya, according to the pricing list on GlobalPetrolPrices.com — a site that tracks fuel prices globally.

A litre of super petrol is averaging Sh131.63 in Kenya while in Tanzania it is going for Sh125.2. Uganda has the costliest super petrol in the region at Sh158.1 per litre followed by Burundi at Sh152.85.

In September last year, Kenya had the most expensive super petrol in the region at Sh134.72 per litre, while the commodity retailed at Sh131 in Uganda. It was the cheapest in Tanzania at Sh115.26. The relatively high cost in Kenya was linked to taxes and levies.

There are seven levies and two taxes that Epra takes into account when setting fuel prices, which have been blamed for the high cost of petroleum products. The levies accounted for nearly half of current petrol costs, shifting the spotlight to taxation of petroleum products.

Tanzania scrapped a Sh4.90 ($0.043) levy charged per litre of fuel in a bid to lower fuel prices from the start of this month.

Kenya’s fuel subsidy has been crippled in the wake of the Russia-Ukraine war that pushed crude oil prices to levels seen more than 10 years ago.

Government sources say the Treasury will struggle to pay oil marketers more than Sh25 billion over the next two months to keep pump prices unchanged despite a jump in the cost of shipping the commodity.

The current fuel being consumed in Kenya is based on the average crude oil prices of $82.03 a barrel, and the monthly review set for next Tuesday at $92.

Oil prices have jumped more than 30 per cent since 24 February, touching $139 a barrel at one point this week.

The oil price had fallen back to about $106 a barrel at one point on Wednesday, but by Thursday morning it was trading at around $116.

Officials at the energy regulator Epra reckon that the Treasury would require at least Sh10 billion this month and another Sh15 billion in April to compensate oil marketers and keep local pump prices unchanged.

With the fund supporting the subsidy exhausted, the Treasury will struggle to pay the marketers billions of shillings at a time when it’s faced with rising spending pressure from critical items like the August General Election and Covid-19 vaccines.

jmutua@ke.nationmedia.com

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VenturesNow

Nigeria targets 1,268MW from new power plants

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Eight brown and green field hydropower projects built through public-private partnerships are expected to yield 1,268 megawatts of electricity, according to the Nigerian government.

It was learned that the Federal Executive Council had authorised the concession of one of the power projects, while three other power projects had already been awarded to concessionaires.

According to a February 2024 document that our correspondent was able to receive from the Federal Ministry of Water Resources and Sanitation in Abuja on Friday, three of the hydroelectric projects had already been finished, while the remaining five were in varying states of completion.

Prof. Joseph Utsev, Minister of Water Resources and Sanitation, delivered the document to the National Council on Water Resources and Sanitation during its thirty-first regular meeting.

With a population of more than 200 million, the nation has struggled with inadequate power generation and supply, with energy companies producing and distributing between 3,000MW and 4,000MW.

With a combined production of 1,338 megawatts, the Kainji and Jebba hydroelectric dams, operated by Mainstream Energy, provide approximately 33% of Nigeria’s current electricity generation of 4,000 megawatts.

The government has been investing in hydropower plants, which are powered by water turbines instead of gas, to help alleviate the situation. Since January of this year, the appalling state of the electricity supply has gotten worse as gas suppliers to gas-fired thermal power plants have stopped supplying the product to the plants because of the $1.3 billion in debt that the electricity producing facilities owe.

In a recent ministry presentation, the minister of water resources said that significant advancements in brown and green field hydropower production through public-private partnerships had been made.

“We have conclusively concessioned some projects while still developing others through various PPP models itemised as follows: concession of the 40MW Dadinkowa Hydropower Project in Gombe State. We have attained financial closure, and the plant is operational, thereby, stabilising the transmission voltage of the North-East of Nigeria.

“Concession of the 30MW Gurara Hydropower Plant in Kaduna State up to financial closure and the plant, which is under rehabilitation, will commence commercial operation in the third quarter of the year 2024.

“Concession of the 40MW Kashimbila Hydropower Plant in Taraba State. The Federal Executive Council approval has been secured, the concession agreement executed and the commencement fee paid by the concessionaire to the special concession account as approved by the Federal Ministry of Finance Budget and National Planning,” Utsev said.

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Tanzania begins fresh round of Treasury bond auctions

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In an effort to reduce national debt and increase the amount of money in circulation in the face of a lack of foreign currency, the Bank of Tanzania (BoT) has started a fresh round of Treasury bond auctions.

Prior to the conclusion of the 2023–2024 fiscal year, the central bank announced plans to reopen 10-year, 15–year, 20–year, and 25–year Treasury bonds. The first event of this plan will be a tender auction for a 20-year bond on February 21 at an interest rate of 15.49 percent.

The bond with the highest interest rate, a 25-year bond, will be reissued on March 6.

According to the BoT’s official auction calendar, at least eight more bond tenders in the four maturity categories will be floated before the end of June, with interest rates starting at 11.44 percent for the 10-year coupon.

Tanzania’s domestic debt was at Tsh30.67 trillion ($12.03 billion) by the end of December 2023, a Tsh485.4 billion ($190.35 million) rise from November, according to the BoT’s monthly review report for January, which was released this week.

According to the report, 75.5 percent or more of the domestic debt stock was made up of Treasury bonds.

Since its debut in April 2021 on the Dar es Salaam Stock Exchange, the 25-year bond has gained significant traction on the DSE, greatly surpassing the popularity of shorter-term options.

According to the report, the most recent auction in December brought in a total of Tsh493.1 billion ($193.37 million) in offers, with Tsh420.7 billion ($164.98 million) coming from winning bids.

The bond will support government initiatives to expand the financial markets in the nation, stretch the maturity profile of domestic debt, and generate money to close budget deficit gaps. It will also act as an anchor for other market instruments, including corporate bonds and mortgage financing.

Its set coupon rate of 15.95%, exemption from withholding tax, and semi-annual interest payment are its main draws.

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